Job growth is strong but labor market still seeking mojo

Hiring at job fairs and elsewhere has picked up but is well below pre-recession levels. (AP, John Althouse)

Last Friday, the government released a blockbuster employment report that showed the economy added 288,000 jobs in June and an average 272,000 the past three months.

Tuesday brings the release of its underperforming cousin — a survey on job turnover that has been pointing up a labor market yet to regain its pre-recession mojo.

The net employment gains spotlighted in the Labor Department’s flagship report are tallied by adding up all new hires and subtracting layoffs, the number of workers quitting jobs and “other separations.”

According to the Labor Department’s Job Openings and Labor Turnover survey, layoffs have plummeted, while hiring and quits have picked up but remain far below prerecession levels.

“The U.S. labor market has experienced a striking decline in dynamism,” Goldman Sachs economist David Mericle says in a research note. The decline has occurred over the past 15 years but has been especially prominent since the recession.

Part of the reason workers are staying put and employers are hiring less is that larger companies account for a growing share of employment and new business formation has declined, Mericle suggests. The bigger firms, meanwhile, have done a lot of “firm-specific training” that could may make it less advantageous for employees to leave.

An even bigger factor, though, is worker insecurity — a lingering aftereffect of the Great Recession, Mericle writes, citing Census Bureau research.

Should economists care about a less dynamic labor market as long as net job growth is healthy?

And when workers don’t switch to jobs in which they can earn and produce more, overall productivity in the economy suffers. Mericle cites studies showing that low turnover reduced productivity by at least half a percentage point from 2009 to 2011 and cut annual economic growth by 0.4 percentage point.

His analysis also shows that low turnover makes it more difficult for the unemployed — especially the long-term jobless — to find work.

“It risks locking out the unemployed and marginally attached, in some cases permanently,” Mericle writes.